Retail Analytics

Selecting Sites for La-Quinta Inns

La Quinta Motor Inns is a moderately priced chain of motel inns located across the United
States. Its market is the frequent business traveler. The chain is looking at expanding to newer locations.
Consequently the management has acquired data on 100 randomly selected inns belonging to La
Quinta. The objective was to predict which sites are likely to be profitable.
To measure profitability, La Quinta used Operating Margins, which is the ratio of sum of profit,
depreciation and interest expenses divided by total revenues. (Although Occupancy is often used as a
measure of a motel’s success, the company statistician concluded that occupancy was too unstable,
especially during economic turbulence). The higher the operating margin, the greater the success of the
inn. La Quinta defines profitable inns as those with an operating margin in excess of 50% and
unprofitable inns with margin of less than 30%. After a discussion with a number of experienced
managers, La Quinta decided to select one or two independent variables from each of the categories:
competition, market awareness, demand generators, demographics and physical. To measure the
degree of competition, they determined the total number of hotel and motel rooms within three miles
of each La Quinta Inn. Market awareness was measured by the number of miles to the closest
competing motel. Two variables that represent sources of customers were chosen. The amount of office
space and college and university enrollment in the surrounding community were demand generators.
Both of these were measures of economic activity. A demographic variable that describes the
community is the median household income. Finally, as a measure of the physical qualities of location,
La Quinta chose the distance to the downtown core.
These data are stored using the following format:
 Operating margin in percent
 Total number of motels and hotel rooms within three miles of La Quinta Inn
 Number of miles to closest competition
 Office space in thousands of square feet in surrounding community
 College and university enrollment (in thousands) in nearby university and/or college
 Median household income (in $ thousands) in surrounding community
 Distance in miles to the downtown core.
Question
The Top Management has got details of 6 new locations. Develop a suitable model which can be used to
predict the Operating Margin of these locations. Based on the model how many out of the 6 locations
would be approved by La Quinta?
 Retail Analytics

There is a upward trend in office spaces and a downward trend in no. , enrollment is very scattered and
income is showing